Executive Briefings

Gaming the System: How One Manufacturing Company Saved Itself With Radical Transparency

There are three basic conditions if you want to work for Jack Stack, and they go for everybody from senior executives down to the people who clean his company's bathrooms. The first is you have to learn how to read and understand the company's financials, the second is you really have to believe there is no "I" in "team," and the third is you have to get into the habit of asking, "What could go wrong, and what are we going to do when it does?"

Gaming the System: How One Manufacturing Company Saved Itself With Radical Transparency

Stack, 68, is the CEO and co-founder of SRC Holdings, a Springfield, Missouri, company owned entirely by its 1,600 employees. Since its launch in 1983, SRC's main business has been remanufacturing engines and other components for trucks, tractors and other heavy equipment, which means taking worn gear and returning it to like-new condition. It's a tough, highly cyclical business. "If GDP is less than 2 percent, we're flat," Stack says. "If it's above that, we're on fire." Last year, SRC booked $16m in profits on $532m in sales to customers like General Motors, John Deere and Navistar.

Over the years, SRC has evolved into a highly entrepreneurial miniconglomerate that has launched more than 60 companies in industries ranging from banking to medical devices to furniture. It has also developed an unusual culture — a humane, Midwestern blend of quantitative management, radical transparency and practical paranoia — that has made it the flagship of what's known as the open-book-management movement.

SRC, a place where sports metaphors rule, calls its distinctive brand of open book "the Great Game of Business." A small but passionate cult of business owners has grown up around two big ideas, which Stack has promoted in two books, The Great Game of Business and A Stake in the Outcome: One idea is that you can boost performance by making a game of tracking and improving key metrics. The other is that if you want employees to care about their jobs as if they were owners, you should make them owners.

There are many reasons SRC has become a model for other businesses — not least of which is that the Great Game promises to bridge a lot of the distrust between management and labor — but the real proof of the idea is that it works financially. In 1983, SRC's survival was a day-to-day question; a share of the company's stock was worth ten cents. Today, its shares, which have split six times over the years, are worth $70.30 each. If you'd been able to invest $1,000 in SRC in 1983, you'd have about $4m today.

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Stack, 68, is the CEO and co-founder of SRC Holdings, a Springfield, Missouri, company owned entirely by its 1,600 employees. Since its launch in 1983, SRC's main business has been remanufacturing engines and other components for trucks, tractors and other heavy equipment, which means taking worn gear and returning it to like-new condition. It's a tough, highly cyclical business. "If GDP is less than 2 percent, we're flat," Stack says. "If it's above that, we're on fire." Last year, SRC booked $16m in profits on $532m in sales to customers like General Motors, John Deere and Navistar.

Over the years, SRC has evolved into a highly entrepreneurial miniconglomerate that has launched more than 60 companies in industries ranging from banking to medical devices to furniture. It has also developed an unusual culture — a humane, Midwestern blend of quantitative management, radical transparency and practical paranoia — that has made it the flagship of what's known as the open-book-management movement.

SRC, a place where sports metaphors rule, calls its distinctive brand of open book "the Great Game of Business." A small but passionate cult of business owners has grown up around two big ideas, which Stack has promoted in two books, The Great Game of Business and A Stake in the Outcome: One idea is that you can boost performance by making a game of tracking and improving key metrics. The other is that if you want employees to care about their jobs as if they were owners, you should make them owners.

There are many reasons SRC has become a model for other businesses — not least of which is that the Great Game promises to bridge a lot of the distrust between management and labor — but the real proof of the idea is that it works financially. In 1983, SRC's survival was a day-to-day question; a share of the company's stock was worth ten cents. Today, its shares, which have split six times over the years, are worth $70.30 each. If you'd been able to invest $1,000 in SRC in 1983, you'd have about $4m today.

Read Full Article

Gaming the System: How One Manufacturing Company Saved Itself With Radical Transparency